Khind eyes expansion

Consumer electronics and household appliance vendor Khind Industries is planning a fully-fledged assault on the Middle East consumer market. Company CEO Cheng Ping Keat speaks to ECN about how the Malaysian minnow plans to realise its lofty ambitions.

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By  Ronan Shields Published  December 5, 2006

|~|FKeat-Cheng-Ping-KHIND-CEO-.jpg|~|Khind CEO Cheng Ping Keat identifies counterfeit goods as a problem in the region.|~|Consumer electronics and household appliance vendor Khind Industries is planning a fully-fledged assault on the Middle East consumer market. Company CEO Cheng Ping Keat speaks to ECN about how the Malaysian minnow plans to realise its lofty ambitions. Electronic Channel News When did Khind Industries establish a presence the Middle East? Cheng Ping Keat Our first shipment to Dubai was in 1988, which was a consignment worth US$4, 700. The deal represented Khind’s first venture outside the Malaysian market and since then we have expanded our presence in the region each year. Our traditional Middle East strategy has been to increase annual shipments and establish distribution deals in key markets. However, we’ve had to review this approach given that we now have deals servicing the entire GCC region. ECN Why is Khind involved so heavily in the Middle East? CPK The growing importance of the Middle East market to our business has seen us shift our focus from Malaysia to adopt a more globally oriented vision. The Middle East accounts for more than half of our global exports at present and we are keen to develop this further. The opening of our regional office in Dubai in 2001 represented our first major commitment to the region, and resulted from the fact that we recognised the difficulty of servicing this marker remotely. We quickly realised that the company would have to increase its market presence in the region if we were to take full advantage of the opportunities available. This prompted us to open our warehousing and re-export facility in Jebel Ali Free Zone (JAFZ) last year. The facility is proving extremely important to the future growth of our business in the Middle East, as the local market relies heavily on fostering healthy working relationships with distributors and resellers. ECN Does the Middle East present any specific commercial challenges? CPK Each country in the Middle East presents its own set of challenges – as with any region – but there are a few issues that are common to all markets. The most critical issue relates to our reliance on distributors to represent our interests and promote our brand in various countries. It is difficult to operate in this region without forming partnerships with local companies. This makes our channel partnerships in the region vitally important to our overall strategy. It also accounts for our policy of appointing sole distributors in each country. We have found in this region that it’s crucial for companies not to have competing interests – this can lead to a complete breakdown in communication. Another key challenge relates to the abundance of fake goods in the region – particularly in Saudi Arabia. In a sense it is quite flattering to discover copies of your products – it’s almost a measure of success – but it does pose a very serious threat to the industry overall. Many of the goods originate from China. I believe the scale of the problem is due to the liberal trade policies that encompass the free zones in Dubai. However, we seem to be quite limited in terms of the existing options available to halt this trade. Very often counterfeiters will try and make marginal changes to the branding to evade copyright laws, which only adds to our frustration. The growing sophistication of counterfeit operations make it difficult for us to distinguish between the counterfeit products and authentic goods. Very often we have to analyse the products quite thoroughly before we can declare them real or fake. The emergence of Middle East-based vendors also poses a unique challenge to foreign companies operating in the region. This was another factor in our decision to open our warehouse in JAFZ so quickly. Our aim is to penetrate the market before these local companies can start producing the volumes necessary to rival us. ECN What commercial expansion plans does Khind have for the region? CPK Our immediate plans for the region hinge on the roll-out of our revised product range early next year, which will have a strong emphasis on ‘lifestyle’ products, such as televisions and DVD players. We are also planning to exhibit at the Middle East Electricity exhibition in Dubai in February, where we will launch a number of new products. ||**||Khind's Middle East expansion plans|~|Cheng-Ping-Keat-2F.jpg|~|Khind CEO Cheng Ping Keat claims the company is a mid-market brand.|~|ECN Which countries in the Middle East and Africa are you targeting specifically? CPK As the re-export hub of the Middle East, the UAE will always be central to our regional strategy. In terms of the country's domestic market, the maturing freehold property sector is having a positive impact on demand for consumer electronics and household appliances. This is a market that we intend to capitalise on. While the UAE is relatively small in terms of population, its consumer market is characterised by rising levels of disposable incomes. The influx of tourists visiting the country makes it one of the most lucrative markets in the region. Outside the UAE, we recently negotiated an exclusive partnership with Bamarouf in Iran. This development is key to our immediate expansion plans, as we have identified Iran as a relatively untapped market with huge potential for growth. The emerging African markets are also important to our strategy for the broader region. By establishing a presence in these markets, we believe that this will help foster brand-loyalty down the track as they develop further. ECN What are Khind's growth expectations for the next 12 months? CPK I think our expansion into the Iranian market will enable us to achieve a 30% growth rate in the region over the next 12 months. In 2006, our turnover in the Middle East was US$6million but we hope to increase this to US$8.2million in 2007. In terms of expanding our presence, we are aiming to clinch new deals in African markets and expand our exports to Europe and Australia. ECN How do you plan to position yourself in the market? CPK We are positioning Khind as a middle market brand. We happily admit that we are not in a position to compete with the major European and Asian brands in the premium sector of the market. However, we are also mindful of the increased competition posed by the new breed of Chinese brands targeting the entry-level sector of the market. It is impossible to compete with these brands on price, so key to our strategy is to differentiate our brand from both ends of the spectrum. ECN What strategies does Khind employ in terms of expanding its presence in this sector of the consumer market? CPK We have developed what we call an 'inno-valu' philosophy, in which we stress both the competitive price points and high quality of our product range. We believe that by leveraging these factors we can forge a niche in this highly competitive sector of the consumer market. As an emerging brand, Khind has to challenge the reputation of the established European and Japanese brands. Our strategy of providing our customers with quality products that are competitively priced does apply some pressure to our profit margins, but we meet these challenges by keeping our operational overheads to a minimum. The slow rate of technological development in the household appliance market certainly facilitates this approach. It means that companies in our position can bridge the gap in terms of technological sophistication, enhancing our reputation among users. Our goal is to be able to offer the same technology as the major brands at much cheaper price points. ECN Khind has a long-standing and relatively unique partnership deal with Australian brand Mistral. What does this arrangement entail? CPK We secured the rights to produce goods under the Mistral brand name in the 1990s. We saw the deal as an ideal opportunity to leverage the global reputation of Mistral and develop a reputation for producing quality products. Effectively, we were buying into the market occupied by an established brand. At the time we maintained a number of OEM deals with some major consumer electronics and household appliance brands, so in a way the arrangement was an extension of our existing capabilities. In terms of our current relationship, we have adopted a two-tiered approach to working with Mistral. We currently ship a range of Mistral products to the Asian and Australian markets (under license) and promote the Khind brand in the Middle and Far East as well as Europe. Both brands retail in specialised outlets in their respective markets. We are eager to emphasise the quality of our products - more so than the cost - as we have aspirations of becoming a world-class brand. ECN What unique benefits or opportunities does the Middle East offer your business? CPK The maturing nature of the Middle East market enables companies, such as Khind, a rare opportunity to steal a march on the more established brands. Given the current market dynamics, we are confident that the Middle East will prove the ideal launch pad for our plans to establish Khind as a truly global brand.||**||

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